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US Speaker Ryan opens door to delayed corporate tax cut
[WASHINGTON] US House of Representatives Speaker Paul Ryan on Wednesday left the door open to a possible delay in implementing a huge corporate tax cut, following a media report that his fellow Republicans in the Senate are exploring the option.
Republicans in Congress are working on separate plans to give the US tax code its biggest overhaul since the 1980s. President Donald Trump and his House allies have proposed slashing the rate companies pay to 20 per cent from 35 percent.
But the Washington Post reported on Tuesday that the Senate could include a one-year delay in its version of the bill to make it easier to comply with the chamber's rules that aim to limit any legislation's impact on the US deficit.
Wall Street, where investors remain focused on the tax bill's chances of passage, was trading largely flat on Wednesday after opening lower as bank stocks came under pressure from a near-flat Treasury yield curve.
Asked if House Republicans would consider a delay in implementing the lower corporate rate, Mr Ryan told Fox News Radio on Wednesday: "So what economists tell us ... is that you still get very fast economic growth and you actually are encouraging companies to spend on factories and plants and equipment and hiring people sooner with the phase-in."
Mr Ryan, the highest ranking Republican on Capitol Hill and a former chairman of the House's tax-writing panel, said both chambers of Congress would work on their own tax cut package and iron out the differences in a conference committee.
"The Senate is still focused on getting an economic growth plan and the House does as well. So at the end of the day, this is all to the good, it's just a debate about how good it gets," he said.
The tax overhaul is a priority for Mr Trump, who says it will boost economic growth and create jobs. Republicans have yet to score a major legislative accomplishment since he took office in January, even though they control Congress as well as the White House.
Democrats have blasted the tax proposals as a give-away to corporations and the rich.
Asked if the corporate tax cut would be delayed by a year, Senator John Thune, a Republican member of the Senate Finance Committee, said that part of the tax plan was "still a work in progress."
Two other senators on the committee said as far as they knew there was no definite decision on a one-year delay.
Financial markets are nervous about the potential outcome of lawmakers' plans to cut corporate taxes, and whether Congress can pass the overhaul quickly.
"I do think there's disappointment with Republicans kicking the tax bill around. And that's why we're seeing this meandering in stocks today. Some of the things leaking out are not encouraging. It causes pause, and money to stay on the sidelines," said Bucky Hellwig, senior vice-president at BB&T Wealth Management in Birmingham, Alabama.
WARNING TO REPUBLICANS
The latest version of the House Republicans' tax bill would add US$1.7 trillion to the federal budget deficit over 10 years, more than the US$1.5 trillion they initially announced, according to the nonpartisan Congressional Budget Office, which tallies the costs of legislation.
The CBO's assessment gives more impetus to the Senate's bill.
The House bill slashes tax rates for large corporations, small businesses and wealthy Americans, while sharply reducing or eliminating tax breaks that benefit many middle-class Americans, including deductions for state and local tax (SALT) payments, college tuition and home mortgage interest.
Senate Democratic Leader Chuck Schumer said victories for Democrats in state elections on Tuesday should be a warning to Republicans, especially in parts of the country where income and property taxes are generally higher.
Some analysts have said that residents of New York and New Jersey would be among those hardest hit by the changes to deductions.
Voters in New Jersey elected a Democratic governor on Tuesday, ending eight years of Republican rule, while Virginia elected a Democrat to succeed its outgoing Democratic governor.
"The Republicans should look at the elections last night, and it should be a giant stop sign for their tax bill. Where did they get clobbered? In the suburbs. Where does the tax bill clobber middle-class and upper middle-class people? In the suburbs," Mr Schumer said.
There are enough Republicans from high-tax states in the House to torpedo the tax bill, given that Democrats are likely to be united in their opposition to it. Republicans, who have a slim 52-48 majority in the Senate, also may need support from Democrats to pass their version of the bill.
Thune told reporters this week's state elections were a wake-up call for his party in Congress.
"It does speak to the need for us to get accomplishments ... think right now there's a general frustration in the country that even though we've gotten some things done on our agenda, that some of the big-ticket items remain unfinished."
Republicans have so far failed to live up to campaign promises to repeal the Obamacare healthcare law, or pass a massive infrastructure bill.
One provision in the Senate tax bill that may differ from the House's version is related to the estate tax.
Several Republican senators, including Susan Collins of Maine, have said they do not see a reason to repeal that tax, which only applies to a person's estate worth more than US$5.49 million, or US$10.98 million for married couples.
Republicans have complained that the tax, which can be as high as 40 per cent, is a form of double taxation that hits small businesses and farms hard.
Ms Collins, a key moderate whose vote will likely be needed to pass the Republican tax legislation, demurred when asked whether the Senate bill will leave the estate tax in place.
"Until it is released I've been asked not to comment on the specifics, but it's certainly true that I expressed reservations about having complete repeal of the estate tax," Ms Collins told reporters.